The Survival Of The Tech Cycle

Ray Zinn launched his first semiconductor company at the risk of his entire family’s future on an industry that is very cyclical. At the time, he had more than 36 profit-earning GAAP years out of the 37 he put in. The one year that resulted in a minor loss was only due to a small write-down during the closing of a fabrication facility that was redundant.

Each industry today will go through cycles. It’s only natural that all will have to endure many business and economic cycles. The technology industry faces a third type of cycle that other businesses don’t usually face. Mostly, these cycles are in the undulations of technology innovation, market saturation, advancement and reinvention. Profitability in these markets relies heavily on mastering these different cycles.

Sine Waves Of Money And Markets

According to Forbes.com, both the global and national economies go through cycles. Most is driven primarily by consumer spending habits. All revenue streams are either delayed or accelerated by consumers and their employment and income statuses. When a recession hits the economy, the amount consumers spend starts to slow down. In the area of technology, consumers are spending much less on things like laptops, smartphones, cameras and more. Technology is typically at the bottom of most people’s list of “needs” when money is tight. It has been researched that these cycles will typically last around six years.

Before the Great Recession had hit, these cycles were a little more predictable. Cycles in different industries will have their own timelines. Some may be shorter than the technology industry cycles and other industries might last longer. As a rule of thumb, the high-technology industry will usually oscillate between three and five years. Unfortunately, many tech companies who didn’t fully prepare ahead of time for these cycles ended up regretting it and going bankrupt.

Product Types, Introductions And Timing

It is essential for all companies to be able to manage their down cycle time and release products in appropriate phases. If a company fails to do this correctly, they will not be able to grow or the company can die out. All technology companies should take a good look at the past in order to see what kind of cycles they can expect for their particular product categories, industries, sectors and general economy flows. Even though future cycles cannot be accurately predicted, it is possible that their timing can be similar to past cycles. If a company can match their predicted cycles to their product timing, their company will have a better future.